Supreme Court Decision 2008Du9140 ( October 13, 2011)

National High Court Decision 2005No2142 (Law No. 9.07, 2006)

The market price of stocks of an Association-registered corporation shall be the average price of the standard price of the securities association every day announced every two months before and after the date of transfer calculated according to supplementary assessment methods.

The market price of stocks of an Association-registered corporation shall be deemed to be the average daily standard price of securities association every two months before and after the date of transfer calculated according to supplementary evaluation methods. In this case, the amount calculated by adding the premium rate in the case of stocks held by the largest shareholder, etc., and the Plaintiff constitutes an abnormal transaction under which stocks are low-price and thus is subject to rejection of unfair calculation, and is not subject to retroactive taxation

2011Nu3687 Revocation of Disposition of Imposing capital gains tax

KimA

○ Head of tax office

Seoul Administrative Court Decision 2006Gudan11869 Decided November 9, 2007

Seoul High Court Decision 2007Nu33148 Decided May 15, 2008

Supreme Court Decision 2008Du9140 Decided January 13, 2011

May 26, 201

July 14, 2011

1. The plaintiff's appeal is dismissed.

2. The plaintiff answer the costs of lawsuit after the appeal.

The judgment of the first instance shall be revoked. The imposition of capital gains tax of KRW 652,812,170 against the plaintiff on March 2, 2005 by the defendant shall be revoked.

1. Details of the disposition;

A. △△△△ Co., Ltd. (hereinafter referred to as “instant company”) is a company registered with the Association (i.e., KOSDAQ-registered). Of the total issued shares, the Plaintiff owned 18.2% (i.e., 2,008, 940 shares; hereinafter referred to as “instant shares”); 15.8% of the total issued shares; and 19.5% of the foreign accounting fund company.

B. The plaintiff, as the representative director of ○○○○, owned 30.01% of the 30.01% of the 30.01% of the 30.01% of the 30.01% of the 30.01% of the 30.0% of the 30.066, and thus the plaintiff and ○○○○ constitutes the "person with special authority" under Article 101 (1) and (4) of the former Income Tax Act and Article 98 (1) 4 of the former Enforcement Decree of the Income Tax Act (amended by Presidential Decree No. 17825 of Dec. 30, 2002; hereinafter the same shall apply) and Article 98 (1) 4 of the former Enforcement Decree of the 2002.34% of the 34% of the 34% of the 34% of the 2000s company's shares, and the plaintiff and ○○○ was the largest shareholder.

C. On July 31, 2001, the Plaintiff transferred the instant stocks to ○○○ through over-the-counter trading to KRW 9,900,00, the closing price of the Association Brokerage Market on the day immediately preceding the trading date (hereinafter “the transfer price of this case”). The transfer price of this case was determined as the transfer price per share of the instant stocks and paid the relevant tax amount (hereinafter “stock transaction”).

D. On March 2, 2005, the defendant issued the instant disposition imposing capital gains tax of KRW 652,812,170 to the plaintiff for the year 2001. The grounds for the disposition are as follows.

The transfer price of this case cannot be deemed as the market price per share of the shares under Article 60(1) of the former Inheritance Tax and Gift Tax Act. The transfer price of this case shall not be deemed as the market price per share of the shares under Article 60(1) of the former Inheritance Tax and Gift Tax Act, and 11,938 won, which is the average amount of the base price for the securities business association for 2 months before and after the base date of appraisal (transfer date) under Article 63(1)1 (b) and (a) of the former Inheritance Tax and Gift Tax Act, plus the premium at the rate of 20% by the largest shareholder under Article 63(3) of the former Inheritance Tax and Gift Tax Act, shall be deemed as the market price per share of the shares of this case. Therefore, the Plaintiff is deemed to have unjustly reduced the tax burden by transferring the shares of this case to 00,000 won which is lower than the market price of this case. Accordingly, applying the provisions of Article 101(1) of the former Income Tax Act to the difference between the transfer price reported by the Plaintiff and the transfer price.

[Recognition] Fact that there is no dispute, Gap evidence No. 1-1, Eul evidence No. 1, and whether all pleadings are held

2. Whether the disposition is lawful;

A. The plaintiff's assertion

(1) Article 63(1)1 of the former Inheritance Tax and Gift Tax Act applies only to the supplementary assessment method applicable only to the case where it is difficult to calculate the market price under Article 60(1) of the former Inheritance Tax and Gift Tax Act as of the evaluation base date. In the transfer of the shares of this case, the transfer price of this case is the closing price of the Association Brokerage Market as of the day immediately preceding the transaction date, and its price is an objective exchange price formed through a normal transaction, which corresponds to the market price under Article 60(1) of the former Inheritance Tax and Gift Tax Act. Thus, in this case where the market price under Article 60(1)1 (a) of the former Inheritance Tax and Gift Tax Act can be calculated for one share of this case, the transfer price of this case can not be applied to the case where the largest shareholder is assessed by the supplementary assessment method and the supplementary assessment method under Article 63(1)1 (a) of the former Inheritance Tax and Gift Tax Act, but the defendant's disposal of the shares of this case by the largest shareholder shall be applied to the wrongful calculation method.

(2) Even if the market price of the instant shares ought to be deemed the value calculated under Article 63(1)1(b), (a), and (3) of the former Inheritance Tax and Gift Tax Act, the transfer of the instant shares cannot be deemed an abnormal transaction that lacks economic rationality in light of sound social norms or commercial practice, and thus, does not constitute an unfair reduction of tax burden on the relevant income. Therefore, the provision on the denial of wrongful calculation under Article 101(1) of the former Income Tax Act cannot be applied.

(3) When the contents and purport of Article 167(6) of the former Enforcement Decree of the Income Tax Act (amended by Presidential Decree No. 18173, Dec. 30, 2003; hereinafter referred to as the "Enforcement Decree of this case") provides that transactions between individuals and corporations which fall under the market price by wrongful calculation under the Corporate Tax Act shall be excluded from the list of wrongful calculation under the Corporate Tax Act, the provision of the market price applied at the time of wrongful calculation under the Corporate Tax Act and the Income Tax Act before the amendment of the Enforcement Decree of this case constitutes a violation of tax justice and public interest. Therefore, even in the case of the stock transaction in this case which occurred before the amendment of the Enforcement Decree of this case, it is reasonable to apply the provision of this case retroactively to the other taxpayer for the same taxable object, and thus, it is reasonable to impose double taxation on the other taxpayer for the same taxable object such as the transfer of stocks of this case. Accordingly, in the case of a transaction between individuals and corporations, the difference between the average market price before and after the date of the purchase (2).

B. Relevant statutes

It is as shown in the attached Form.

C. Determination

(1) Whether the transfer price of this case can be deemed as the market price

(A) Article 167 of the former Enforcement Decree of the Income Tax Act on the delegation of Article 101(4) of the former Enforcement Decree of the Income Tax Act provides that "If it is deemed that the tax burden has been unjustly reduced by acquiring more than the market price or transferring less than the market price in transaction with a person in a special relationship, the acquisition price or transfer price shall be calculated on the basis of the market price." In applying Article 101(4) of the former Enforcement Decree of the Income Tax Act, the market price shall be calculated on the basis of the market price."

In addition, Article 60 (1) of the former Inheritance Tax and Gift Tax Act provides that "the value of the property on which inheritance tax or gift tax is levied under this Act shall be the market price as of the date of commencing the inheritance or the date of donation (hereinafter referred to as the "date of appraisal"). In this case, the value assessed by the method of appraisal stipulated in Article 63 (1) 1 (a) and (b) (excluding the case falling under the provisions of Article 63 (2)) shall be deemed the market price, and Article 63 (1) 1 (a) of the same Act provides that "the average market price of the Korea Stock Exchange every two months before and after the date of appraisal" shall be deemed to be the market price with respect to the method of appraisal of stocks traded by the Korea Stock Exchange, and Article 63 (1) 1 (b) of the same Act provides that "the provisions of item (a) shall

On the other hand, Article 63 (3) of the former Inheritance Tax and Gift Tax Act provides that "in applying the provisions of paragraph (1) 1, 20/100 of the value assessed under paragraph (1) 1 shall be added to the value assessed under paragraph (1) 1 for the largest shareholder or largest investor as prescribed by the Presidential Decree and the shareholder or investor who has a special relationship with him (hereafter in this paragraph, referred to as the "large shareholder, etc."), but 30/100 shall be added to the total number of stocks issued by the corporation in question where the largest shareholder, etc.

(B) The legislative purport of Article 60(1) of the former Inheritance Tax and Gift Tax Act was newly established on December 30, 1996 by Act No. 5193 of Dec. 30, 196. The legislative purport is to assess shares of an Association-registered corporation in principle, but there is a possibility that the price on the day of a specific transaction, which has been traded, might be affected by a price fluctuation, depending on the situation on the trading date, so if the price on the day of the transaction is considered to be the market price, it is difficult to avoid arbitraryness and ensure objectivity. In addition, the legislative structure and contents of the above provision directly stipulate the method of assessment without restriction as to the method of assessment of shares of an Association-registered corporation, and in light of the purport of the system of denial of unfair calculation and harmonious operation with the substance over form principle, the market price of shares transferred by an Association-registered corporation shall be deemed to be the average price of shares of the Association-registered corporation under Article 60(1) of the latter part of the Inheritance Tax and Gift Tax Act, barring special circumstances.

(C) In the instant case, the Plaintiff sold the instant shares to ○○○, a person with a special relationship on July 31, 2001, and the Defendant: (a) prior to and after the transfer date calculated pursuant to the latter part of Article 60(1) of the former Inheritance Tax and Gift Tax Act; (b) Article 63(1)1 (c) of the former Inheritance Tax and Gift Tax Act; and (c) Article 63(3) of the former Inheritance Tax and Gift Tax Act, the Plaintiff’s transfer of the instant shares to the lower price than the above market price is deemed to be KRW 11,938,00,000,000,000,000,000 won was added to the average of the base price of the Association’s securities business associations, which was announced every two months after the transfer date; and (b) Article 63(1)1 (b) of the former Income Tax Act; and (c) Article 198 of the former Income Tax Act did not constitute a transfer price of the Plaintiff’s shares to the lower price.

(2) Whether the provision regarding the wrongful calculation is applied

(A) The provision of wrongful calculation under the former Income Tax Act is a system that makes it difficult for a resident to unjustly avoid or reduce tax burden by abusing all the forms of transactions listed in each subparagraph of Article 98(2) of the former Enforcement Decree of the Income Tax Act without reasonable means by a person having a special relationship. It is limited to cases where a person having a tax authority denies it and reasonably shows income in a manner prescribed by the law. In light of the economic person’s perspective, it is limited to cases where it is deemed that a person disregards the economic rationality due to disregarding the calculation of negative and unreasonable acts. Determination of the existence of economic rationality is not just just because it is not ordinarily conducted in the transaction behavior with a person having a special relationship, but rather, whether the transaction lacks economic rationality in light of sound social norms or commercial practice (see, e.g., Supreme Court Decision 200Nu91979, Jul. 26, 1996). 197; 200Du919719, Jul. 19, 1997).

(B) In light of the following circumstances, Gap's evidence Nos. 1 and 2, Gap evidence Nos. 3 through 5, Gap evidence No. 7-1, 2, and Eul evidence No. 1, the whole purport of pleadings as a whole. ① The plaintiff was holding 18.2% of the total issued shares of the company at the time of the transfer, 0.8% of the total issued shares of the company at 000, and the plaintiff was holding 30.01% of the representative director at 30.01% of the shares, and there is a change in the management rights because all shares of the plaintiff at 00,000 were transferred to 30,000,000,000 shares were transferred to 30,000,000 shares were transferred to 30,000,0000,000 shares were no more than that of the company at 0,0000,000 shares were transferred to 3,000,000 shares were transferred.

(3) Whether the enforcement decree of the instant case is retroactively applied

(A) Article 167 (6) of the former Enforcement Decree of the Income Tax Act, which is the Enforcement Decree of the instant case, provides that Article 101 (1) of the Corporate Tax Act shall not apply where a transfer or transfer of property between an individual and a corporation falls under the value under Article 89 of the Enforcement Decree of the Corporate Tax Act and Article 52 of the Corporate Tax Act does not apply to the transaction of the relevant corporation: Provided, That this shall not apply where it is deemed that the transfer income tax has been reduced by fraudulent or other illegal means. Article 1 of the Addenda of the instant Enforcement Decree provides that "this Decree shall enter into force on January 1, 2004", and Article 18 of the Addenda provides that "the amended provisions of Article 167 (6) shall apply from the portion that comes into existence as one of the transfer income tax and one of the two preceding houses after this Decree enters into force."

(B) In principle, tax laws and regulations should be strictly interpreted regardless of whether they are taxable requirements or tax exemption requirements. As a result of the reduction or abolition of the previous tax reduction or exemption on the transfer of the reclaimed land of public waters, insofar as there is a face that the person who acquired the license for reclamation of public waters at the time of the enforcement of the amended Acts and subordinate statutes does not satisfy the expectation interest of the person who acquired the license, the previous provisions are not applied retroactively in the Addenda to the amended Acts and subordinate statutes, the scope of the previous provisions shall not be extended and interpreted arbitrarily in the interpretation of the Addenda to the relevant transitional provisions (see, e.g., Supreme Court Decision 95Nu825, Aug

(C) As seen earlier, the Enforcement Decree of the instant case was amended as of December 30, 203, and even according to the relevant Addenda, the Enforcement Decree of the instant case shall apply from the beginning of the entry into force of this Decree, and the amended Enforcement Decree of the instant case shall also be deemed to have removed tax confusion by changing the method of calculating the market price and the time of taxation base between individuals and corporations having special relations with each other, in light of the amended Enforcement Decree’s purport of “the removal of tax confusion by changing the method of calculating the market price and the time of taxation base between individuals with special relations with each other”, it cannot be deemed that the Enforcement Decree of the instant case was amended as a reflective consideration of the provisions contrary to the public interest and tax justice, and thus, the Plaintiff’s assertion

(4) Double taxation

(A) Gift tax and capital gains tax vary between the requirements, timing, and taxpayers for the establishment of tax liability. In imposing each tax, the tax authority should make an independent determination in accordance with the substance of each taxation requirement. Unless there is a special provision excluding duplicate application of the two parties that meet all the requirements under the above provision, only one taxation is possible (see, e.g., Supreme Court Decision 2002Du12458, May 13, 2003).

(B) In the case of the instant stock transaction as alleged by the Plaintiff, even though the market price is assessed differently in the case of a corporation and an individual, there are many unreasonable points to view the transaction price of the stocks registered with the Association as the market price due to severe price fluctuations, concerns over distortion of prices, etc. In light of this, it is reasonable to view the legislators as having made a legislative decision that they would not regard the transaction price at the time of transfer based on the legislative formation discretion, and only the average amount based on the statutory evaluation method should be seen as the market price. In light of the above, the criteria for calculating the market price applicable to the corporate tax law and the corporate tax law and the income tax law are different from each other, and can be applied separately as alleged by the Plaintiff, it cannot be deemed that the

(5) Therefore, when the Plaintiff transferred the instant shares to a person with a special relationship, the Plaintiff transferred the instant shares at the transfer price lower than the price of the listed shares assessed under Article 63(1)1 (b) and (c) of the former Inheritance Tax and Gift Tax Act, which is deemed as the market price, as seen earlier, at the transfer price under Article 63(3) of the same Act, and the said transaction was economical.

Since it is difficult to view the transfer of shares as a reasonable transaction, it is deemed that the Plaintiff’s transfer of assets at a price lower than the market price to a person in the special field, thereby unjustly reducing the tax burden. Thus, the Defendant’s disposition of this case, which was rendered by applying Article 63(1)1(b) and (3) of the former Inheritance Tax and Gift Tax Act to the transfer of shares, deemed the market price of the shares at the market price of the shares, and by applying Article 101 of the former Income Tax Act to the denial of wrongful calculation, did not contain any error.

3. Conclusion

Therefore, the plaintiff's claim of this case is dismissed as it is without merit, and the judgment of the court of first instance is just and it is dismissed as it is so decided as per Disposition.